As I watch the stock market (and my net worth) drop daily, I wonder where the bottom is. Even a big drop in interest rates from the Fed did not stop another hundred point drop. The thousand point drop in the Dow since January 1, has moved the speculation of a recession from a possibility to nearly verified certainty. Apple computer dropped 24 points in one day on mildly disappointing earnings from aggressive predictions.

The financial sector has been hardest hit with a nearly 15% drop in the S&P financial sector in the 4rth quarter alone. The rest of the market is still doing OK, but the financial sector is 20% of the market and it undoubtedly has spill over effect.

Both the Democrats and Republicans want to fix this mess less it be laid at their laps at election time. Furthermore as a result of the weak dollar and great cash position of foreign countries and companies, they are buying up American companies at bargain prices at a record rate, supplying our economy with a dramatic cash infusion.

Much of this money is coming from sovereign wealth funds, capital pools controlled by foreign governments. This poses a new regulatory issue as potentially hostile nations with ample cash pose to control American companies with possible strategic importance. On the other hand there may be some very positive outcomes from foreign sovereigns having a stake in out economy. We generally don’t wish harm to our customers. Free trade is a great impetus towards peace.

Foreign funds poring in, the Fed dropping rates, and the politicians concerned for their jobs has to put a floor on this market somewhere; but we have not seen it yet.

PS I wrote this the day before the 600 point turn in the market.

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